Canadians are searching for top dividend stocks to hold inside their TFSA portfolios.
The strategy is popular with both income investors and those looking to set some cash aside for retirement, as distributions and capital gains are not taxed.
Let’s take a look at Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) to see if it is attractive today.
International operations
Bank of Nova Scotia has invested heavily to build a strong international presence. The main focus is in Latin America, with Mexico, Chile, Peru, and Colombia being the primary areas of interest.
Why?
These four countries represent the core of the Pacific Alliance trade bloc, which was set up to promote the free movement of goods and capital among the member states. In total, Bank of Nova Scotia has access to more than 200 million potential customers across the four countries.
As the middle class expands, demand should rise for loans and investment products, and Bank of Nova Scotia is well positioned to benefit.
In addition, the opening of the four markets provides a great opportunity to provide cash-management services to corporate customers who are expanding into new areas.
Strong results
Bank of Nova Scotia recently reported strong numbers for fiscal Q3 2017. The bank generated net income of $2.1 billion in the quarter, representing a 7% increase over the same period last year.
The international division contributed 29% of the profits.
Dividend growth
Management just raised the quarterly dividend by three cents to $0.79 per share. That’s good for an annualized yield of 4.2% at the time of writing.
The company has a strong track record of raising the payout. In fact, the compound annual dividend-growth rate for the past decade is 7%.
Should you buy?
Bank of Nova Scotia’s international operations provide a nice hedge against a downturn in Canada, and the company should see strong growth out of the Latin American region in the coming years.
Investor concerns over the Canadian housing market might put additional pressure on the bank stocks in the near term, but any pullback could present a nice buying opportunity.
If you have a buy-and-hold investing style, I think Bank of Nova Scotia deserves to be on your TFSA radar.
